THE Government has put back the sale of the last tranche of the taxpayer-owned stake in Lloyds Banking Group due to the turmoil in financial markets.

Osborne had pledged to offload the remaining shares in last year's election manifesto

Chancellor George Osborne had pledged in last year’s election manifesto to offload the remaining holding – just less than 10 per cent of the company – to the public this spring.

But with markets gripped by worries over China’s growth prospects and sliding oil prices, Osborne said “now is not the right time” and the Treasury would only sell “when turbulent markets have calmed down”.

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The proposed sale to private investors was expected to raise about £2billion.

It is also my responsibility to ensure economic responsibility so with these turbulent financial markets now is not the right time to have that sale

Chancellor George Osborne

The taxpayer stake, which resulted from Lloyds’ £20billion bailout during the financial crisis, has been gradually reduced from about 43 per cent, returning more than £16billion to taxpayers at a profit.

But Lloyds’ shares have fallen by over 10 per cent during the recent market sell-off to below the price of close to 74p at which the Government would break even. They closed down ¾p to 64p. Osborne said: “I want to create a share-owning democracy.

“It is also my responsibility to ensure economic responsibility so with these turbulent financial markets now is not the right time to have that sale. We need those markets to calm down and then we can proceed with the sale.

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It was hoped the sale would raise £2billion

“We’ve got hundreds of thousands of people interested in buying these shares, I want to sell them the shares – but it wouldn’t be right to undertake that sale when, frankly, things are pretty turbulent out there on the stock markets and global financial markets.”

Lloyds said the reduction in the Government’s stake to date reflected “the hard work undertaken over the last four years to transform the group into a simple, low-risk and customer-focused bank”.

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The chancellor wants to sell the shares at a time when the market is more stable

It added: “The timing of any future retail sale is a matter for the Government. “Our focus is on moving the Group forward so that it can continue to be profitable and deliver sustainable returns to all our shareholders.”

Laith Khalaf, senior analyst at investment firm Hargreaves Lansdown: said: “This will be a big disappointment for the hundreds of thousands of investors who queued up for a chunk of Lloyds – but taking a big loss on selling shares when markets are low was always going to be a bridge too far for the Chancellor.”